Many startup robo-advisors, like Betterment, claim they can offer similar or better returns than legacy wealth managers for much lower fees.

To test this claim, and better understand if these firms pose a threat to incumbents, analysts at asset management firm Bernstein opened multiple accounts with two leading European robo-advisors, Nutmeg Saving and Investment Ltd., according to Bloomberg.

Bernstein found that while stand-alone robo-advisor models work, the companies are not necessarily a threat to incumbents. Both firms' portfolios, which use algorithms to allocate assets based on an investor's responses to a set of online questions, were found to be easy to use, lower in cost than incumbent solutions, and provided comparative returns.

Bernstein believes the technology used by the likes of Nutmeg and Investment Ltd. has a "rosy future." But it also suggested that because the barriers to accessing robo-advisory technology are low, in terms ofrisk and cost, it may not be these stand-alone robo-advisors that ultimately reap the benefits. Incumbents can easily implement the technology themselves, staving off disruption.

It's likely that incumbents will take advantage of robo-advisory technology and maintain dominance of the market. Although Bernstein remained on the fence over the future of the robo-advisor market, it did point out that incumbents such as Vanguard and Schwab have already entered the fray with their own robo-advisory products.

It also highlighted the significant advantages these firms have over startup robo-advisors, including established brands and large volumes of assets under management, which can be easily transferred to robo-advisory products.

We think this means that while several new players, such as Scalable Capital, have found unique selling points (USPs) that will enable them to survive in the market, incumbents ultimatelywill not feel threatened by robo-advisors. Instead, legacy players will continue to develop their own robo-advisor products and maintain their hold of the wealth management market.

Robo-advisors are threatening to upend the enormous global wealth management industry in several ways, and they are likely to arrive in full force within the next few years.

Sarah Kocianski, senior research analyst for BI Intelligence, Business Insider's premium research service, has compiled a detailed report on robo-advising that looks at the market for robo-advisory services, the drivers behind consumer adoption of robo-advising, why the robo-advisor market presents an opportunity to traditional wealth management firms, and how startup robo-advisors can succeed as massive legacy companies begin offering their own services.

Here are some of the key takeaways from the report:

Large incumbent wealth managers won't lose out to startups like Betterment and Wealthfront. Instead, they are embracing the technology and launching their own products,which are scaling quickly.

Consumers across all asset classes are receptive to robo-advisors — including the wealthy. 49% of this group would consider investing some of their assets using a robo-advisor.

The majority of assets managed by robo-advisors will come from people who already have some investments. We estimate that the volume of assets that comes from people who don't currently invest will be less than 1% of the total by 2020.

Startups are going to find it difficult to scale, and will need to differentiate their products to succeed. They are already doing this by providing white label services to wealth managers, and more customized stand alone solutions.

In full, the report:

Provides a forecast for the volume of assets robo-advisors will manage by 2020.

Highlights the factors that will drive the growth of robo-advisors

Explains the different types of robo-advisor business model.

Details the outlook for incumbents and startup robo-advisors in the wealth management industry.

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